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What You Should Learn from the Elizabeth Holmes Trial

Elizabeth Holmes, founder of the famously failed biotech startup Theranos who is now on trial in federal court in California, recently took the stand in a last-ditch effort to charm and finesse her way out of 11 counts of fraud and related criminal activities. This is a precarious move by any defendant, but it must have seemed inevitable to her attorneys as the prosecution continued to roll out one convincing witness after another. The witness list included defrauded investors, disillusioned ex-employees, duped pharma partners and other customers and, finally, misled patients. Imagine how you’d feel being told you may have HIV or cancer based on test results known to be flawed and highly unreliable.

Federal prosecutors have built a case which – even given the many vagaries of the jury system and a boatload of bogus sympathy for a new mother – looks to be quite strong. Unfortunately, criminal trials are all about false precision, nit picking, and form over substance. That makes it especially difficult where intention is an element of the required proof, as jurors struggle to pierce the fog of confusion, irrelevant material and baseless objections emitted by the defense attorneys.

Anything less than a convincing conviction — which makes a boldfaced and clear distinction between “trying” and “lying” — will be a black eye for entrepreneurs across the board. And especially for young women trying to build new businesses. This unfortunate outcome is possible because the defense strategy is to try to walk the Theranos tightrope and turn this former paper billionaire and “mistress of the universe” into a damaged doofus who was way over her head and didn’t know what was going on in her own business. She’s being portrayed as a naĂŻf in all matters legal and financial and an abused victim who was manipulated, lied to, and taken advantage of by all the smart older men around her. Poor dear.

Holmes finished her direct and clearly rote testimony, and now the red meat of the entire proceeding, her cross-examination, has begun. Holmes spent several days on direct testimony using a lot of fancy scientific jargon to describe Theranos’ early days while steadfastly avoiding any discussion of the critical last years of the company’s existence, when it was abundantly clear that her miracle machines were deeply flawed and couldn’t remotely do the tasks she continued to brag to the world about. That’s when the overt lies and growing concealment began in earnest. Most recently, she’s added an alleged rape in college to her repertoire, which she now says is what caused her to drop out.  She also claimed that her live-in lover and former COO forced her to have unwanted sex in the home they secretly shared for years.

In some ways, I’m sure Holmes was as anxious to get to this contested and competitive phase of the trial as the rest of us are. She’s gonna show all of us just how smart she is and blow that jury away. In some ways, her trial performance (sans the Steve Jobs costume) could simply be the last futile manifestation of a belief that she can con anyone in the “fake it ’til you make it” tradition of the Valley. Unfortunately for her, half a lie is still a lie. Overall, the current defense plan appears to be to avoid, confuse, commingle and ignore a staggering number of inconvenient facts, documented misrepresentations and outright lies and then go on and blame it all on the many older men in her life.

Whatever the final verdict, there are abundant lessons for all of us trying to build new businesses and change the future. To find them, you have to look into the tired explanations, cheap dodges, blame shifting, and other ongoing efforts by the defense attorneys to justify and excuse her many wretched excesses and bald-faced lies.

Remember this trial as you deal with your own problems and crises every day, because it’s easy for anyone to fall into these kinds of sloppy rationalizations and offer them up as excuses. The trick to avoid them, and the resultant embarrassment and misery, is to keep them top of mind and dodge them like the plague.

Understand that every entrepreneur in every business at one time or another faces painful moments and ethical choices. The best resist the temptation to adopt situational ethics and rationalize their own actions by claiming that it’s what everyone else is doing, my intentions are pure, it’s only a little lie, I’ll fix it on Friday, or that oldest rationalization of all – the ends justify the means. And honestly, if you don’t easily recognize a few of the dodges outlined below, you’re either a saint or seriously deluded.

In their efforts to defend Holmes, her attorneys have seized on every one of these assertions and we can expect to hear a constant further stream of BS as her testimony continues.  
    Here are the Top Ten Elizabeth Excuses:

  • Fake It (Part 1) – I was a true believer and just trying really hard.
  • Fake It (Part 2) – I was just doing what everyone else does.
  • Fake It (Part 3) – I was misunderstood – these were all aspirations, not current realities. Some of my statements were almost true.
  • Blame Game (Part 1) – These were all sophisticated investors – shame on their due diligence for not finding out that I was lying to them.
  • Blame Game (Part 2) – Employees are supposed to be smart, experienced people and they all screwed up and lied to me about it.
  • Blame Game (Part 3) – Employees were “Chicken Littles” who got unduly upset about falsifying test results and sending them to real patients.
  • Blame Game (Part 4) – Patients and their doctors should have done more tests on their own. The patients were cheapskates looking to save money on tests and they got what they paid for.
  • The Little Me Defense (Part 1) – I was CEO but actually had no clue about what was going on in the labs, who we were doing business with, or what investors and regulators were being told.
  • The Little Me Defense (Part 2) – I was just a young woman, and I was dominated and sexually abused for years by my secret lover, Sunny Balwani, who was actually in charge and running everything.
  • The Little Me Defense (Part 3) – Oh, did I mention that after my indictment and shortly before formal trial proceedings began, I got pregnant and had a child. Twenty years in jail would be so tough on both of us.

And finally, there’s the Trump truism: A lie is not a lie if the truth should not be expected.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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